Category Archives: Effectuation

Garbage In, Garbage Out: The Garbage Can Solutions Model

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The children’s story “Alice in Wonderland clearly identifies the paradigm of the Garbage Can Solution model. When Alice meets the ever-elusive Cheshire Cat they have this conversation:

‘Would you tell me, please, which way I ought to go from here?’

`That depends a good deal on where you want to get to,’ said the Cat.

`I don’t much care where–‘ said Alice.

`Then it doesn’t matter which way you go,’ said the Cat.

`–so long as I get SOMEWHERE,’ Alice added as an explanation.

`Oh, you’re sure to do that,’ said the Cat, `if you only walk long enough.’

The question is if SOMEWHERE is the right place.

“Entrepreneurship is […]a way of thinking that emphasizes opportunities over threats,” according to strategic thinkers such as Krueger, Reilly and Carsrud. The “somewhere” alluded to by Alice can be either threatening or opportunistic for an entrepreneur. It can also be both. The trick is to know the difference.

The “Garbage Can Model” is one tool that is often used by entrepreneurs. The garbage can model is one where all of the entrepreneur’s historical decisions and solutions are thrown into a metaphorical can. When a problem arises, the entrepreneur is able to reach into the can to find a solution to their current problem. We see this often with serial entrepreneurs who look to their past success to solve a different set of problems. This has also been referred to as the sophomore jinx.

Traditionally, the Garbage Can Solution model describes the accidental or random confluence of four streams. A number of academics believe that decision making occurs in a random meeting of: choices looking for problems, problems looking for choices, solutions looking for problems to answer and decision makers looking for something to decide.”

In fact, one well known academic questions the validity of this particular model when she asks, “Does the garbage can model describe actual decision making or is it simply a labeling of the unexplained variance of other, more powerful, descriptions of strategic decision making?”

Additionally, does the garbage can take into account our existing bias based decisions? If we fall back on choices that worked for us in the past, does that mean they will work for us today? Do we need to solely rely on what is currently in our leaders’ bag of tricks to creatively develop new ideas, solutions, or products?

In more establish organizations, famous social scientists Cyert & March tell us that “Exogenous, time dependent arrivals of choice opportunities, problems, solutions and decision makers” are thrown together so that any solution can be associated with any choice. Never a good way to approach decision-making. What they are alluding to is that solutions, problems are often thrown together from previous experience with the hope that the right problem hooks up with the right solution. With unlimited resources and time, this may result in relevant information.

However, is the time-constrained, resource scarce environment of the entrepreneur an appropriate place to utilize this model? This is exactly where entrepreneurs slip. In seeking repeatable processes, creativity is lost. All start-ups should look to the creative solution making process as much as possible.

The answer, as usual, is it depends. Although The Garbage Can Model is not a rational method of strategic thinking, there is significant research backing up this school of thought on decision-making. On first look, this is not a particularly creative approach, nor is it direct and focused on finding specific problems and solutions. By definition the Garbage Can model of decision-making assumes that nothing new is added. The only items in the can are what has already been done or considered. It is history rather than innovation that drives this approach.

However, the creative entrepreneur is not focused on what’s already in the garbage can, but rather what the entrepreneur could be doing to add to the can in order to make rational, novel, and strategic decisions. Unfortunately, for many entrepreneurs, the right solution never gets added to the mix of ideas, problems and solutions.

The best response for entrepreneurs is to find creative answers for their start-ups that are removed as much as possible from prior bias. In order to accomplish this, entrepreneurs must be exploratory and experiential, note boundary limits and consciously develop an environment where all parties involved in the project have a strong, relevant voice. This assures more team buy in to the project. Eliminate power plays and look for the important breaks in typical industry patterns.

So get out of the building, find customer data (however imperfect it may be) and go somewhere. Whether your team decides to dumpster dive or not, I will leave that up to you. However, you should be aware of the upside and limitations for utilizing this business model in your start-up.

Out-Of-The-Building Blocks

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I had the opportunity to chat with Steve Blank about the Business Model Canvas and his Stanford class. I suggested that there is much work to be accomplished even before embarking on the Lean Launchpad Class. When I taught at the University of Southern California (USC), the cornerstone class before the Business Plan class was the Feasibility study. In fact, there were two tracks for entrepreneurs: one for technology and another for other businesses, and each had separate feasibility and business plan classes. (Disclaimer: I am not a believer in the traditional business plan, but rather focus on the operational and business-building sides of startups.)

I adopted many of the topics in both courses as a precursor to the Lean Launchpad class for mechanical engineers at Cal State Los Angeles, which I developed. When I taught at USC, the feasibility class was part of the MBA program. Therefore, many of the entrepreneurial and business concepts were already familiar to many of the students. However, the engineers at Cal State had no experience with business and entrepreneurial terminology and concepts.

I found the key to starting a new feasibility class for engineers was to introduce a few creativity concepts and exercises as a way of enriching their way of thinking. Engineers tend to think in a very linear fashion, and are sometimes uncomfortable with ambiguity in business. They weren’t as interested in variations in valuations or marketing—they just wanted the formula.

At some point in any business process, the research stops and the marketing begins. I am also a big subscriber to effectuation – the concept that entrepreneurs must think differently than ongoing businesses; using evolving means to reach new goals. Startups that are resource poor can’t throw money at a problem in order to make it sellable. A large business may be able to afford such a play, but not a startup. Entrepreneurs must use a different toolkit and a different way of thinking in order to succeed. Both effectuation and the business model canvas provide those tools.

In my entrepreneurship class at USC, students were required to meet 25 strangers. Steve Blank’s classic line is “to get entrepreneurs out of the building.” Entrepreneurial knowledge can only be gained through meeting people in their industry, advisors, and anyone else who can help budding entrepreneurs think through the parts of their business, how they compete, what niche does their competitor target, and just about everything required to be known before thinking about spending a dime.

So what kind of research could an entrepreneur do before starting on their entrepreneurial journey? This is secondary research to be completed before getting out the door. This needs to be done before to make the primary research (getting out the door) more valuable and shorter in duration. After all, having better hypotheses will yield more confirmations:

  1. Know thyself. What are you good at, who do you know that can advance the concept, and why is this an important undertaking? Can you articulate the value and benefits? Is the opportunity clear?
  2. Know the industry. Every aspect of the industry, every competitor and their niche, how would you find the pattern of change in the industry to become the leader of the pack, who are the major suppliers, can you successfully target the underserved market?
  3. Know the value chain – who gets paid and how, can you gain access to critical supplies on good terms? Do you know every step of your business process from order taking to fulfillment and post sale customer service? Where is the most value added?
  4. What is the best way to reach the customer? What effects their buying decisions?
  5. Who are your target customers and their demographic data? Are they big enough to constitute a market? What color underwear do they wear? Yes, you need to know everything about the client down to their undergarments.
  6. Financials – Don’t even think of continuing if you can’t do a spreadsheet forecast called a pro-forma. We all know the spreadsheet is a work of fiction, but how can you guestimate the entrepreneur’s bet? What are the premises underlying the data on your targeted financials? What is the delivered cost of the product? What are the multiple streams of revenue? Get the premises right and be convincing to yourself.

Possibly the most important skill to teach engineers and principle investigators is a little marketing and a whole lot of sales. Let’s face it; with few exceptions scientists are not famous for being extroverts. We need to impart to them that sales is not a shady profession, but rather an exercise in building relationships and helping potential clients solve problems. Good sales and marketing skills help build relationships allowing engineers to fix the world and its problems. Sales and engineering make for a good match.

However, relationship building is sometimes difficult for engineers and principle investigators. Social engagement must be built into all classes. In my class, everyone had to do a one-minute sales pitch that you could give someone in an elevator—a classic elevator pitch. After the first three or four intrepid students made their pitches, the whole class understood the key elements. Not everyone ended up being comfortable with selling, but then again not everyone will become a CEO.

So remember that before jumping into the Business Model Canvas, there is still much thought and research to put into your plan. If you are able to do the homework before embarking on validation tests in the canvas, my hypothesis is that you may have better information through good secondary research techniques before embarking on validation testing in each of the nine building blocks.